NYC implements enforcement of AI Audit Law in hiring practices today

July 26, 2023 Rob Abruzzese

Dr. Frida Polli, co-founder and CEO Pymetrics, demonstrates AI technology used to assess job skills during an interview with The Associated Press at the Pymetrics headquarters, Thursday, Nov. 18, 2021, in New York. AP Photo/Mary Altaffer

Share this:

The New York City Department of Consumer and Worker Protection (DCPW) began its enforcement of a groundbreaking law on July 5, 2023, that aims to govern the use of artificial intelligence (AI) in hiring processes.

The legislation requires employers to undergo audits of their Automated Employment Decision-Making Tools (AEDTs) — algorithms that match employer requirements to job applications. The intent of the audit is to assess if these tools, used for categorizing or prioritizing resume characteristics, lead to a disparate impact on candidates based on protected classes, such as race, ethnicity, and gender.

The law applies to all employers and employment agencies hiring for positions within New York City. Audits must be performed before the AEDT’s initial use and annually thereafter. These audits must be executed by an independent auditor to ensure an unbiased evaluation of the AI tool.

In addition to the auditing requirements, the new law mandates explicit notification to job candidates. Employers must inform every candidate whose resume will be evaluated by an AEDT within 10 days of its use. The notice, which can be delivered via the employer’s website, email or U.S. mail, or included in the job listing, must specify the criteria being assessed. It should also disclose the candidate’s right to request an alternate method of evaluation. It should be noted, however, that the law does not mandate that an alternate evaluation method be provided.

Non-compliance with the law could lead to hefty penalties for employers. The first violation carries a fine of $500, with subsequent violations ranging from $500 to $1,500, each calculated per incident and for each section of the law violated.

In response to this new regulation, employers are advised to determine if their practices fall within the scope of the law. If AI tools are being utilized in their hiring processes, they should promptly engage a vendor that provides the requisite audit services. The appointed auditor should assume responsibility to defend and indemnify. Employers are also expected to consider their preferred method of notification to applicants, establish the AI-evaluated criteria, and draft the required notice.